Deck 26: Earnings, Productivity, and the Job Market

Question 1

"Jobs are the key to economic progress. Unless we create more jobs, our standard of living will fall." Is this statement true or false? Explain.

Answer 1

The given statement is ' True '.
Jobs are a key to economic progress. Employment to people provides them with wages which gives them the power to spend. Money circulates in the economy when these people spend money on the things they want. As a result, higher money circulation leads to higher standard of living of the people.
If no jobs are created, then money circulation in the economy would stop and thus there would be stagnation in the economy. People would not have money to spend and thus there would be a fall in the standards of living of the people.

Question 2

"If Jones has a skill that is highly valued, she will be able to achieve high market earnings. In contrast, Smith may work just as hard or even harder and still earn only a low income."
a. Does hard work necessarily lead to a high income?
b. Why are the incomes of some workers high and others low?
c. Do you think the market system of wage determination is fair? Why or why not?
d. Can you think of a more equitable system? If so, explain why it is more equitable.

Answer 2

a) Hard work will be highly paid only if their hard work leads to better production and efficient productivity. If despite hard work the employee is not able to improve on his productivity, then it's not necessary that it would translate to high income.
b) Income depends on skills and the work employees carry. Workers with high earning are usually highly skilled or their productivity is more efficient than others. This difference in skills brings about a difference in the wages of the employees.
c) The market system of wage determination is not that fair as there is lots of discrimination that happens in the market on the basis of religion, caste, creed, color etc. Due to this, some highly skilled employees still get paid less because of their color or any other reason. This makes the system unfair.
d) A more equitable system would be to pay employees on the basis of the skills they possess and their productivity levels. This system would not lead to any unfair bias against any employee and would reward them as per their skills and efficiency.

Question 3

People who have invested heavily in human capital (for example, lawyers, doctors, and even college professors) generally have higher wages, but they also generally work more hours than other workers. Can you explain why?

Answer 3

Occupations like lawyer, doctors and even college professors use their high skills to work for the society. Their profits or earnings depend upon the services they render. This results in their high wages. As a result, their opportunity cost of leisure is more as compared to low wage workers. This makes them work for more hours and cash on their opportunity cost lost while not working.

Question 4

"If individuals had identical abilities and opportunities, earnings would be equal." Is this statement true or false?

Question 5

Other things being constant, how will the following influence the hourly earnings of employees? Explain your answer.
a. The employee must work the midnight to 8:00 a.m. shift.
b. The job involves split shifts (work three hours, off two hours, work three additional hours, and so on).
c. The employer provides low-cost child care services on the premises.
d. The job is widely viewed as prestigious.
e. The job requires employees to move often from city to city.
f. The job requires substantial amounts of out-of-town travel.

Question 6

Consider two occupations (A and B) in which people have the same skills and abilities. When employed, workers in the two occupations work the same number of hours per day. In occupation A, employment is stable throughout the year, whereas employment in B is characterized by seasonal layoffs. In which occupation will the hourly wage rate be highest? Why? In which occupation will the annual wage be highest? Why?

Question 7

"Technological change eliminates thousands of jobs every year. Unless something is done to slow the growth of technology, ordinary workers will face a bleak future of low wages and high unemployment." Explain why you either agree or disagree with this statement.

Question 8

If an individual is motivated primarily by the desire to make money, will he or she have an incentive to be helpful to others? Will he or she have an incentive to develop skills that others value highly? Why or why not?

Question 9

Why do some people earn higher wages than others? Why are wages in some occupations higher than in others? How do wage differentials influence the allocation of resources? Explain.

Question 10

Why are real wages in the United States higher than in other countries? Is the labor force itself responsible for the higher wages of American workers? Explain.

Question 11

Indicate the major sources of earnings differences between (a) a lawyer and a minister; (b) an accountant and an elementary school teacher; (c) a business executive and a social worker; (d) a country lawyer and a Wall Street lawyer; (e) an experienced, skilled craftsperson and a 20-year-old high school dropout; and (f) an upper-story and a ground-floor window washer?

Question 12

a. If minority employees are discriminated against, how will this affect their earnings? Use supply and demand analysis to explain your answer.
b. If the average earnings differ between two groups of employees (for example, whites and blacks), does this mean that the group with the lower earnings is experiencing employment discrimination? Why or why not?

Question 13

Is there a relationship between the growth of productivity and changes in wage rates? Can higher earnings be achieved without higher productivity? Why or why not? Discuss.